10-Q 1 hubg-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-27754

 

HUB GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

36-4007085

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

2000 Clearwater Drive

Oak Brook, Illinois 60523

(Address, including zip code, of principal executive offices)

(630) 271-3600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

 

HUBG

 

NASDAQ

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

 

Accelerated Filer

 

Non-Accelerated Filer

 

Smaller Reporting Company

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

On April 29, 2022, the registrant had 33,997,814 outstanding shares of Class A common stock, par value $.01 per share, and 662,296 outstanding shares of Class B common stock, par value $.01 per share.

 

 

 


 

 

 

HUB GROUP, INC.

INDEX

 

 

Page

PART I. Financial Information:

 

Item1. Financial Statements

 

Consolidated Balance Sheets – March 31, 2022 (unaudited) and December 31, 2021

3

Unaudited Consolidated Statements of Income and Comprehensive Income – Three Months Ended March 31, 2022 and 2021

4

Unaudited Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2022 and 2021

5

Unaudited Consolidated Statements of Cash Flows – Three Months Ended March 31, 2022 and 2021

6

Notes to Unaudited Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

Item 3. Quantitative and Qualitative Disclosures about Market Risk

18

Item 4. Controls and Procedures

18

PART II. Other Information

18

Item 1. Legal Proceedings

18

Item 1A. Risk Factors

18

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

18

Item 6. Exhibits

19

 

 

2


 

 

HUB GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

 

March 31,

 

 

December 31,

 

 

2022

 

 

2021

 

ASSETS

(unaudited)

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

$

206,896

 

 

$

159,784

 

Accounts receivable trade, net

 

766,579

 

 

 

701,512

 

Other receivables

 

3,153

 

 

 

3,022

 

Prepaid taxes

 

1,657

 

 

 

2,191

 

Prepaid expenses and other current assets

 

24,378

 

 

 

27,779

 

TOTAL CURRENT ASSETS

 

1,002,663

 

 

 

894,288

 

 

 

 

 

 

 

Restricted investments

 

21,497

 

 

 

24,256

 

Property and equipment, net

 

689,779

 

 

 

681,451

 

Right-of-use assets - operating leases

 

44,118

 

 

 

44,036

 

Right-of-use assets - financing leases

 

2,750

 

 

 

1,252

 

Other intangibles, net

 

190,252

 

 

 

196,672

 

Goodwill, net

 

576,847

 

 

 

576,913

 

Other assets

 

19,228

 

 

 

18,426

 

TOTAL ASSETS

$

2,547,134

 

 

$

2,437,294

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts payable trade

$

418,509

 

 

$

424,923

 

Accounts payable other

 

26,674

 

 

 

12,493

 

Accrued payroll

 

47,521

 

 

 

56,938

 

Accrued other

 

103,111

 

 

 

82,827

 

Lease liability - operating leases

 

12,131

 

 

 

11,364

 

Lease liability - financing leases

 

2,062

 

 

 

1,251

 

Current portion of long term debt

 

97,571

 

 

 

97,273

 

TOTAL CURRENT LIABILITIES

 

707,579

 

 

 

687,069

 

 

 

 

 

 

 

Long term debt

 

174,669

 

 

 

177,479

 

Non-current liabilities

 

42,183

 

 

 

41,572

 

Lease liability - operating leases

 

34,194

 

 

 

34,916

 

Lease liability - financing leases

 

681

 

 

 

-

 

Deferred taxes

 

160,857

 

 

 

155,944

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

Preferred stock: $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2022 and 2021

-

 

 

-

 

Common stock

 

 

 

 

 

Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2022 and 2021; 33,988,791 shares outstanding in 2022 and 33,907,734 shares outstanding in 2021

 

412

 

 

 

412

 

Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2022 and 2021

 

7

 

 

 

7

 

Additional paid-in capital

 

189,168

 

 

 

189,256

 

Purchase price in excess of predecessor basis, net of tax benefit of $10,306

 

(15,458

)

 

 

(15,458

)

Retained earnings

 

1,512,137

 

 

 

1,424,634

 

Accumulated other comprehensive loss

 

(187

)

 

 

(207

)

Treasury stock; at cost, 7,236,001 shares in 2022 and 7,317,058 shares in 2021

 

(259,108

)

 

 

(258,330

)

TOTAL STOCKHOLDERS' EQUITY

 

1,426,971

 

 

 

1,340,314

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,547,134

 

 

$

2,437,294

 

See notes to unaudited consolidated financial statements.

3


 

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

 

2021

 

 

 

 

 

 

 

Revenue

$

1,298,123

 

 

$

919,553

 

Transportation costs

 

1,083,106

 

 

 

810,806

 

Gross margin

 

215,017

 

 

 

108,747

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

Salaries and benefits

 

68,926

 

 

 

56,951

 

General and administrative

 

20,076

 

 

 

19,243

 

Depreciation and amortization

 

10,955

 

 

 

8,502

 

Total costs and expenses

 

99,957

 

 

 

84,696

 

 

 

 

 

 

 

Operating income

 

115,060

 

 

 

24,051

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest expense

 

(1,698

)

 

 

(1,904

)

Other income (expense), net

 

131

 

 

 

(93

)

Total other expense, net

 

(1,567

)

 

 

(1,997

)

 

 

 

 

 

 

Income before provision for income taxes

 

113,493

 

 

 

22,054

 

 

 

 

 

 

 

Provision for income taxes

 

25,990

 

 

 

4,824

 

 

 

 

 

 

 

Net income

 

87,503

 

 

 

17,230

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

Foreign currency translation adjustments

 

20

 

 

 

(10

)

 

 

 

 

 

 

Total comprehensive income

$

87,523

 

 

$

17,220

 

 

 

 

 

 

 

Basic earnings per common share

$

2.60

 

 

$

0.52

 

 

 

 

 

 

 

Diluted earnings per common share

$

2.58

 

 

$

0.51

 

 

 

 

 

 

 

Basic weighted average number of shares outstanding

 

33,644

 

 

 

33,419

 

Diluted weighted average number of shares outstanding

 

33,966

 

 

 

33,775

 

See notes to unaudited consolidated financial statements.

 

4


 

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Purchase Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A & B

 

 

 

 

 

of Excess of

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Predecessor

 

 

 

 

 

Other

 

 

Treasury

 

 

 

 

 

Shares

 

 

 

 

 

Paid-in

 

 

Basis, Net

 

 

Retained

 

 

Comprehensive

 

 

Stock

 

 

 

 

 

Issued

 

 

Amount

 

 

Capital

 

 

of Tax

 

 

Earnings

 

 

Income

 

 

Shares

 

 

Amount

 

 

Total

 

Balance December 31, 2020

 

41,887,088

 

 

$

419

 

 

$

186,058

 

 

$

(15,458

)

 

$

1,253,160

 

 

$

(191

)

 

 

(7,675,084

)

 

$

(266,065

)

 

$

1,157,923

 

Stock withheld for payments of withholding taxes

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(65,979

)

 

 

(3,759

)

 

 

(3,759

)

Issuance of restricted stock awards, net of forfeitures

 

-

 

 

 

-

 

 

 

(9,170

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

271,307

 

 

 

9,170

 

 

 

-

 

Share-based compensation expense

 

-

 

 

 

-

 

 

 

5,117

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,117

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,230

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,230

 

Foreign currency translation adjustment

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10

)

 

 

-

 

 

 

-

 

 

 

(10

)

Balance March 31, 2021

 

41,887,088

 

 

$

419

 

 

$

182,005

 

 

$

(15,458

)

 

$

1,270,390

 

 

$

(201

)

 

 

(7,469,756

)

 

$

(260,654

)

 

$

1,176,501

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2021

 

41,887,088

 

 

$

419

 

 

$

189,256

 

 

$

(15,458

)

 

$

1,424,634

 

 

$

(207

)

 

 

(7,317,058

)

 

$

(258,330

)

 

$

1,340,314

 

Stock withheld for payments of withholding taxes

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(66,369

)

 

 

(5,585

)

 

 

(5,585

)

Issuance of restricted stock awards, net of forfeitures

 

-

 

 

 

-

 

 

 

(4,807

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

147,426

 

 

 

4,807

 

 

 

-

 

Share-based compensation expense

 

-

 

 

 

-

 

 

 

4,719

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,719

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

87,503

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

87,503

 

Foreign currency translation adjustment

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20

 

 

 

-

 

 

 

-

 

 

 

20

 

Balance March 31, 2022

 

41,887,088

 

 

$

419

 

 

$

189,168

 

 

$

(15,458

)

 

$

1,512,137

 

 

$

(187

)

 

 

(7,236,001

)

 

$

(259,108

)

 

$

1,426,971

 

See notes to unaudited consolidated financial statements.

5


 

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

Net Income

$

87,503

 

 

$

17,230

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

35,193

 

 

 

32,111

 

Deferred taxes

 

5,286

 

 

 

4,325

 

Compensation expense related to share-based compensation plans

 

4,719

 

 

 

5,117

 

Gain on sale of assets

 

(4,745

)

 

 

(1,924

)

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

Restricted investments

 

2,759

 

 

 

1,618

 

Accounts receivable, net

 

(65,288

)

 

 

8,389

 

Prepaid taxes

 

535

 

 

 

350

 

Prepaid expenses and other current assets

 

3,403

 

 

 

8,825

 

Other assets

 

(1,516

)

 

 

(189

)

Accounts payable

 

7,771

 

 

 

36,820

 

Accrued expenses

 

7,130

 

 

 

18,695

 

Non-current liabilities

 

(2,540

)

 

 

(3,994

)

Net cash provided by operating activities

 

80,210

 

 

 

127,373

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Proceeds from sale of equipment

 

6,444

 

 

 

14,933

 

Purchases of property and equipment

 

(30,927

)

 

 

(9,522

)

Net cash (used in) provided by investing activities

 

(24,483

)

 

 

5,411

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Repayments of long-term debt

 

(26,024

)

 

 

(33,381

)

Stock withheld for payments of withholding taxes

 

(5,585

)

 

 

(3,759

)

Finance lease payments

 

(526

)

 

 

(772

)

Proceeds from issuance of debt

 

23,512

 

 

 

6,894

 

Net cash used in financing activities

 

(8,623

)

 

 

(31,018

)

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

8

 

 

 

(8

)

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

47,112

 

 

 

101,758

 

Cash and cash equivalents beginning of the period

 

159,784

 

 

 

124,506

 

Cash and cash equivalents end of the period

$

206,896

 

 

$

226,264

 

 

 

 

 

 

 

Supplemental disclosures of cash paid for:

 

 

 

 

 

Interest

$

1,870

 

 

$

2,005

 

Income taxes

$

620

 

 

$

317

 

 

See notes to unaudited consolidated financial statements.

6


 

HUB GROUP, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1. Interim Financial Statements

Our accompanying unaudited consolidated financial statements of Hub Group, Inc. (the “Company,” “Hub,” “we,” “us” or “our”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been omitted pursuant to those rules and regulations. However, we believe that the disclosures contained herein are adequate to make the information presented not misleading.

The financial statements reflect, in our opinion, all material adjustments (which include only normal recurring adjustments) necessary to fairly present our financial position as of March 31, 2022 and results of operations for the three months ended March 31, 2022 and 2021.

These unaudited consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

NOTE 2. Acquisition

Choptank Transport, LLC Acquisition

On October 19, 2021, we acquired 100% of the equity interests of Choptank Transport, LLC (“Choptank”). Total consideration for the transaction was $127.6 million in cash and the settlement of accounts receivable due from Choptank of $0.3 million. In connection with the acquisition, we granted approximately $22 million of restricted stock to Choptank's owners and senior management team, which is subject to certain vesting conditions. The grants of restricted stock were made pursuant to award agreements and issued under our 2017 Long Term Incentive Plan.

The acquisition of Choptank enhanced our refrigerated trucking transportation solutions offering and complemented our growing fleet of refrigerated intermodal containers. Choptank has developed a proprietary technology platform that we will leverage to enhance our truck brokerage service line.

The initial accounting for the acquisition of Choptank is incomplete as we, with the support of our valuation specialist, are in the process of finalizing the fair market value calculations of the acquired net assets. Certain post-closing activities outlined in the acquisition agreement remain incomplete. As a result, the amounts recorded in the consolidated financial statements related to the Choptank acquisition are preliminary and subject to change.

 

The following table summarizes the preliminary allocation of the total consideration to the assets acquired and liabilities assumed as of the date of the acquisition (in thousands):

 

 

October 19, 2021

 

Cash and cash equivalents

$

5,596

 

Accounts receivable trade

 

71,482

 

Prepaid expenses and other current assets

 

419

 

Property and equipment

 

169

 

Right of use assets - operating leases

 

922

 

Goodwill, net

 

54,487

 

Other intangibles

 

60,500

 

Total assets acquired

$

193,575

 

 

 

 

Accounts payable trade

$

60,970

 

Accrued payroll

 

3,458

 

Accrued other

 

359

 

Lease liability - operating leases short-term

 

309

 

Lease liability - operating leases long-term

 

613

 

Total liabilities assumed

$

65,709

 

 

 

 

Total consideration

$

127,866

 

 

 

 

Cash paid, net

$

122,270

 

 

7


 

The Choptank acquisition was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded in the accompanying consolidated balance sheet at their estimated fair values as of October 19, 2021 with the remaining unallocated purchase price recorded as goodwill. The goodwill recognized in the Choptank acquisition was primarily attributable to potential expansion and future development of the acquired business.

The following table presents the carrying amount of goodwill (in thousands):

 

Total

 

Balance at December 31, 2021

$

576,913

 

Acquisition

 

(66

)

Balance at March 31, 2022

$

576,847

 

The changes noted as "acquisition" in the above table refer to purchase accounting adjustments related to the Choptank acquisition.

Tax history and attributes are not inherited in an equity purchase of this kind, however, the goodwill and other intangibles recognized in this purchase will be fully tax deductible over a period of 15 years.

The components of “Other intangibles” listed in the above table as of the acquisition date are preliminarily estimated as follows (in thousands):

 

 

 

 

 

Accumulated

 

 

Balance at

 

 

Estimated Useful

 

Amount

 

 

Amortization

 

 

March 31, 2022

 

 

Life

Customer relationships

$

36,300

 

 

$

1,210

 

 

$

35,090

 

 

15 years

Carrier network

$

14,400

 

 

$

1,800

 

 

$

12,600

 

 

4 years

Developed technology

$

6,500

 

 

$

464

 

 

$

6,036

 

 

7 years

Trade name

$

3,300

 

 

$

1,100

 

 

$

2,200

 

 

18 months

The above intangible assets are amortized using the straight-line method. Amortization expense related to this acquisition for the three months ended March 31, 2022 was $2.3 million. The intangible assets have a weighted average useful life of approximately 10.63 years. Amortization expense related to Choptank for the next five years is as follows (in thousands):

 

 

 

Total

 

Remainder of 2022

 

$

6,861

 

2023

 

 

7,499

 

2024

 

 

6,949

 

2025

 

 

6,049

 

2026

 

 

3,349

 

The following unaudited pro forma consolidated results of operations present the effects of Choptank as though it had been acquired as of January 1, 2021 (in thousands, except for per share amounts):

 

 

Three Months Ended

 

 

March 31, 2021

 

Revenue

$

1,013,931

 

Net income

$

16,538

 

Earnings per share

 

 

Basic

$

0.49

 

Diluted

$

0.49

 

 

The unaudited pro forma consolidated results for the annual periods were prepared using the acquisition method of accounting and are based on the historical financial information of Hub and Choptank. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the Choptank acquisition as of January 1, 2021.

8


 

NOTE 3. Earnings Per Share

The following is a reconciliation of our earnings per share (in thousands, except for per share data):

 

 

Three Months Ended, March 31,

 

 

2022